What They Really Think of Us (Swiss Version) - Novartis CEO Would Not Commit to Changing Company Behavior After Latest of Multiple Legal Settlements

The huge corporations which now dominate global health care are creating amazing records of repeated ethical misadventures.  We last discussed multinational Swiss based pharmaceutical manufacturer Novartis' escapades in early 2014.   Since then, the legal settlements and other legal findings just keep on coming, capped with a big one in late October, 2015.

We will summarize them in chronological order.


Japanese Health, Labor and Welfare Ministry Found that Novartis Concealed Serious Adverse Effects

In August, 2014, per the Japan Times, but apparently not reported widely outside of that country.

Novartis Pharma K.K. said it has failed to report at least 2,579 cases of serious side effects to the health ministry, including one that was fatal, related to its drugs for leukemia and other diseases, although employees were aware of the problems.

Of the total, 1,313 cases were related to Glivec and 514 to Tasigna, both drugs for leukemia treatment. Another 261 cases involved Afinitor, a cancer drug, the Japanese unit Swiss drug giant Novartis AG said Friday.

The findings were reported to the Health, Labor and Welfare Ministry the same day.

The marketing staff at Novartis Pharma recognized the side effects but failed to report them to the division in charge, breaking the drug firm’s internal rules, Novartis Pharma said. They were not fully aware of the importance of the problem and higher-ranking officials failed to supervise them properly, it said.

In February, per the PharmaLot blog, the Ministry decided to suspend the company for 15 days, after having issued a business improvement order to it.  More details of Novartis' problems in Japan can be found in the Japan Times.  I cannot find anything to suggest any one in a position of leadership at Novartis faced any negative consequences as a result, however.

Note that by allegedly hiding adverse effects of its drugs, it is possible that the company's alleged actions led doctors and patients to believe the drugs were safer than they really are, possibly leading to overuse of the drugs and resulting in even more adverse effects.  I did not see a discussion of possible patient harm in the discussion of this case.


Novartis Executive Pleads Guilty to Bribing Polish Official

In October, 2014, per a short Reuters (UK) article, and apparently not mentioned elsewhere,

An executive at a pharmaceutical company in Poland who pleaded guilty in a bribery case involving improper payment, works for Novartis, the Swiss drugmaker said on Thursday.

Poland's anti-corruption bureau said on Tuesday two women had appeared in court in a case in which a health fund official was given a tourist trip worth more than $1,000 (620.67 pounds) in exchange for backing the sale of a particular drug.

Both defendants pleaded guilty....

The drug involved was not clear, and the company suggested this was an individual act ("the enquiry relates to an individual and the company is not part of the enquiry.")  Why an individual would do something like this if not to advance her career is not clear, however.  I cannot find any followup coverage of this, nor anything to suggest the supervisors of the executives involved faced any negative consequences.

Again, by bribing an official to promote a particular drug, this case could have led to overuse of the drug, and potentially to patient harm from the drug's adverse effects. 

Novartis Subsidiary Sandoz Settles Allegations that it Misrepresented Pricing Data to US Medicaid

In March, 2015, per the PharmaLot blog,

In what the federal government says is the largest such settlement ever reached, Sandoz has agreed to pay $12.64 million to resolve allegations that it misrepresented pricing data on medicines that were provided to the Centers for Medicare & Medicaid Services.

Sandoz, which is owned by Novartis and markets hundreds of generic drugs in the U.S., allegedly misrepresented the average sales price data to Medicare between January 2010 and March 2012, according to a statement from the Office of the Inspector General of the U.S. Department of Health & Human Services.

A Novartis spokeswoman writes that the drug maker did not admit to any liability or wrongdoing. 'Sandoz continues to be committed to providing high-quality, affordable medicines to U.S. patients and conducting business with customers and the government with integrity.' As part of the settlement, Sandoz agreed to provide certification that it established a government pricing compliance program.

As the OIG explains, Medicare uses the pricing data to set payments for most drugs covered under Medicare Part B....

Again, no one who authorized, directed or implemented any price misrepresentation faced any negative consequences.  Futhermore, as often occurs in US cases, the company did not admit any wrongdoing, and provided the usual public relations boilerplate about upholding the highest principles, the allegations leading to the settlement notwithstanding.

Express Scripts Settles Allegations that it Accepted Kickbacks from Novartis

In May, 2015, also per the PharmaLot blog,

Express Scripts  has agreed to pay $60 million to resolve allegations by U.S. authorities that a business unit participated in a kickback scheme with Novartis that caused federal health care programs to pay for a medicine based on false claims, according to court documents and a regulatory filing.

The U.S. Department of Justice alleged that Novartis offered patient referrals to Accredo Health Group, which is a specialty pharmacy run by Express Scripts, in exchange for bolstering refills of Exjade, a drug used for reducing excess iron in patients who undergo blood transfusions....

Apparently other lawsuits involving allegations of Novartis payments to other pharmacies are pending. Note that the events alleged in some of these proceedings may have occurred while Novartis was already subject to a so-called corporate integrity agreement,

a key issue to watch is the extent to which a so-called Corporate Integrity Agreement that Novartis signed in 2010 factors into the proceedings. These agreements typically run for five years and require a company to establish an internal compliance program and report violations.

At the time that Preet Bharara, the U.S. Attorney in New York, announced the lawsuits against Novartis two years ago, he called the drug maker a 'repeat offender,' and the lawsuits noted that the violations alleged in the litigation took place before and after the CIA was signed.

Note that the settlement was with Express Scripts, although it involved allegations of misbehavior by Novartis.  Note also that this settlement throws into doubt one mechanism now widely used by law enforcement in the US to settle cases involving big corporations, the corporate integrity agreement or defererred prosecution agreement.  These are agreements made by corporations not to behave badly again.  Yet this case may yet demonstrate that these agreements do not deter future bad behavior.

Again, so far, this settlement did not involve any negative consequences for who may have authorized, directed or implemented the bad behavior either at Express Scripts or Novartis.

Novartis Settles US Allegations of Kickbacks to Enhance Sales of Multiple Drugs

In late October, 2015, a larger settlement, at least in monetary terms, of related issues was announced, per Reuters,

Novartis agreed in principle to pay $390 million to settle U.S. allegations that it used kickbacks to speciality pharmacies to push sales of some drugs, the Swiss company said on Tuesday, hitting third-quarter earnings.

Since this case involved hundreds of millions dollars, it got a bit more coverage than the others.  For example, Bloomberg provided some more specifics,

The payment covers all claims related to the medicines Myfortic, Exjade, Tasigna, Gleevec and TOBI, the company said. The U.S. had sought as much as $3.3 billion from Novartis for Exjade and Myfortic claims, claiming it had referred patients to specialty pharmacies and paid kickbacks in the form of rebates to get those pharmacies to recommend the drugs to patients and to increase sales.

It is customary in such settlements for them to allow the accused corporation to avoid any admission of guilt, often with some statement that the corporation neither confirms or denies the allegations.  In this latest cast, however, while the company issued the usual "neither confirm nor deny" statement, the Novartis CEO appeared to want to deny the allegations despite his willingness to pay so many millions to get them behind him, as per Reuters,

Chief Executive Joe Jimenez told reporters Novartis had made the disputed payments to ensure patients took their drugs, including treatments to prevent rejection of transplanted organs, but U.S. government attorneys disagreed.

'It's something we just believe we want to put behind us,' Jimenez said. Novartis said it neither admitted nor denied liability as part of the settlement.

How the payments or rebates to the pharmacies had anything to do with improving patient adherence is not clear.  Mr Jiminez's expertise in improving patient adherence is similarly not clear.  Per his official company biograpphy, his education was limited to business school, and before becoming a Novartis executive, he ran the Heinz company, makers of the famous ketchup (look here and here).  

Note that if, despite the protestations of the CEO to the contrary, the effect of the company's alleged actions was to over-promote use of the drugs, the results could have been excess adverse effects for patients. 

Furthermore, and despite this possibility, per the Wall Street Journal, the CEO also seemed unwilling to agree that the company would change any of its practices beyond paying the money,

Chief Executive Joe Jimenez said the rebates were designed to induce specialty pharmacies to ensure that patients completed a course of medicine. He added that Novartis still used this 'quite common' practice at specialty pharmacies in the U.S.

'We continue to maintain that specialty pharmacies must continue to play a role in ensuring patient adherence,' he said. 'How that is going to play out as to whether we change our behavior or not remains to be seen.'

This suggests that CEO Jiminez really thinks that the company should pay the money and then continue doing what it pleases, based on the rationale that the payments to or discounts given pharmacies were meant to improve patient adherence, not oversell the drugs.  This may reflect what he really thinks of what his company ought to be doing for, or to us, that is to or for the patients who take the drugs it manufactures. 

 Nonetheless, a public relations release tried to make those comments inoperative.

Some media coverage did not accurately reflect our position and the seriousness of the Company's commitment to working with the government to ensure our behaviors and interactions with specialty pharmacies meet the highest ethical standards. As such, we want to emphasize the following points:

Novartis will make detailed admissions of fact concerning the Government’s allegations as part of the final settlement.

Any reports suggesting that we are not addressing the Government’s concerns or the particular issues on which the litigation focused was not intended by the Company.

We remain committed to working with the government on corporate integrity obligations, including those relating to specialty pharmacies, and conducting our business in an ethical manner that is fully compliant with the law.

We await the statement of facts.  Maybe this statement will prove true, but given that the original statement came from the CEO, to whom the PR people who wrote the satement report, perhaps CEO and former purveyor of ketchup Jiminez meant what he said.  As noted in the Modern Healthcare blog,

Patrick Burns, co-director of the Taxpayers Against Fraud Education Fund, a not-for-profit funded by whistle-blowers and law firms that represent them, said he remains skeptical of the company's intentions.

Burns said Jimenez's original statements smack of disrespect for the U.S. Justice Department and the U.S. attorney general.

'It's a level of arrogance and ignorance which is jaw-dropping,' Burns said. 'You have the CEO coming out and brazenly saying we will not even change our practice. I think this really is the time for the attorney general to show her teeth.'

We also await any such dental findings. 


Summary

This set of misadventures are just the latest in a long series by Novartis.  In March, 2014, we noted:
- Italian authorities had fined Novartis and Roche for colluding to promote the use of an expensive opthamologic treatment
- the NY Times published interviews with physicians ostensibly showing how Novartis turned them into marketers for the drug Starlix
- Japanese investigators charged Novartis with manipulating clinical research
- Indian regulators canceled a Novartis import license, charging the company with fraud.

Also,  in 2013, Novartis was fined for anti-competitive practices in its marketing of Fentanyl by the European Commission (look here), and in 2011 its Sandoz subsidiary settled allegations of misreporting prices in the US for $150 million (look here)   Other Novartis misadventures from 2010 and earlier appear here.  So Novartis has quite an impressive, if not infamous record of ethical failures.

Nonetheless, the march of its legal cases continues.  Furthermore, after the latest case, the Novartis CEO suggested that he saw no clear need for the company to change its ways, even though his PR people later tried to recast his statements.

So we see that the big health care organizations which now dominate health care globally continue to misbehave, and current legal efforts centering on settlements and fines seem to do nothing to deter continued misbehavior.  Maybe it is time to end the impunity of the corporate managers who have become rich while such behavior continues on their watch.  Modern Healthcare quoted Mr Burns as saying

the financial penalty in this case didn't seem to be enough to fix the problem. He believes the government needs to begin excluding executives such as Jimenez from federal healthcare programs in order to better get its message across that such behavior won't be tolerated.

In the new PharmaLot blog, Ed Silverman was hopeful that things may really be getting ready to change. He first noted, as we have done many times previously,

Over the years, a parade of drug companies has reached settlements, mostly for paying physicians to favor their medicines or illegally marketing products. Rarely, though, do executives suffer any consequences.

Also,

Mostly, the federal government resorts to large fines, even though countless people may have been prescribed medicines unnecessarily — at great expense and sometimes great harm. And drug makers simply treat these penalties as a cost of doing business. The failure to come down harder is sadly reminiscent of the recent financial crisis in which most heads of the biggest banks escaped unscathed.

Lately, however, there are signs the government might be changing its approach toward recalcitrant executives, and such a move is long overdue. After all, if individuals are not held accountable, the senior officials who run these companies have little incentive to play by the rules.

One can only hope, I suppose.  But to conclude as I have so many times before....

There seems to be increasing recognition that the continuing rise in US health care costs is unsustainable, and that these costs are not buying us good health care.  There are calls to avoid unnecessary, and sometimes harmful care.  Yet there is a persistent disconnect between how continuing dishonest behavior by health care organizations, impunity of their leaders, and lack of accountability by their board members fuel rising costs, shrinking access, and bad outcomes for patients.

To truly reform health care, we will have to at least recognize the causes of the current dysfunction.  Recognizing how health care dysfunction is created by unaccountable, dishonest leadership should lead to true reform that would promote well-informed, honest, accountable leadership that puts patients' and the public's health ahead of personal gain.  

8:50 AM

The March of Legal Settlements Continues into 2015 - Daiichi Sankyo Settles Charges of Kickbacks to Doctors for $39 Million

We are just into January and have our first legal settlement by a major health care corporation of charges of giving physicians kickbacks to spur use of a commercial product.  Like most such stories, this one got little notice.  The most extensive report was in Ed Silverman's PharmaLot blog on the Wall Street Journal site.

The Summary and Allegations

The basic summary...

Daiichi Sankyo agreed to pay $39 million to the U.S. federal government and state Medicaid programs to settle allegations of paying kickbacks to physicians to prescribe several of its drugs.

The allegations were ...

that Daiichi initiated different speaker programs and paid doctors kickbacks – in the form of honoraria and meals, among other things – that were labeled as speaking fees between 2004 and 2011. The speaker programs, however, were problematic, according to the U.S. Department of Justice.

How so? The feds allege that some physicians spoke only to his or her own office staff; the audience sometimes included the physician’s spouse; payments were made to physicians even when participants took turns 'speaking' about duplicative topics at dinners paid for by the drug maker; and the dinners were lavish and, sometimes, exceeded internal Daiichi cost limitations of $140 a person, according to the settlement agreement.

Note that the defenders of physician - industry "collaboration" often defend payments such as speaking fees as necessary "conflicts of interest" to encourage health care "innovation."  Innovation does not seem the right word for the conduct in this case, and the payments seem to be more than just "conflicts of interest."  Nonetheless the defenders often argue that at best, such "conflicts of interest" only need to be disclosed, not limited. 

The drugs whose prescription were allegedly being encouraged by the kickbacks were...

the Welchol cholesterol-lowering medication and the Benicar, Azor and Tribenzor high blood pressure pills

Details of the Penalties, or Lack Thereof

This settlement followed the usual choreography. It included a corporate integrity agreement...

which stipulates that the drug maker must implement compliance programs to prevent such illegal practices from occurring in the future.

It did not apparently include any obligation for the company to admit wrongdoing, much less plead guilty to anything. Instead, a company executive offered the de rigeur statement...

Ken Keller, who heads Daiichi Sankyo commercial operations in the U.S., says 'we are pleased to have finalized these agreements and remain focused on our core mission of helping people live healthy and meaningful lives. We are committed to being an ethical, trusted and respected company, and constantly improving how we operate is part of our culture.'

The irony induced by juxtaposing the present tense "we are committed to being... ethical" and the substance of the charges was apparently lost on Mr Keller.

Finally, no individual who authorized, directed, or provided the kickbacks apparently suffered any negative consequences, much less fines or other legal sanctions.

Summary and Comments

Here comes the New Year, just like the old year. I have lost count of how many posts we have published about legal settlements of cases in which drug, biotechnology, or device companies were alleged to have given physicians kickbacks to prescribe, use or implant their products.

During the last half of 2014, similar cases in our archives include -
November, 2014 - Biotronik settled charges of kickbacks for use of its devices
November, 2014 - Teva settled charges it induced physicians use of drugs by payments to physician
October, 2014 - Biomet settles charges it gave kickbacks for use of its bone growth products
October, 2014 - DaVita settles charges it gave kickbacks for referral of patients to its dialysis clinics


Such kickbacks are obviously unethical, and fit the Transparency International definition of corruption, "abuse of entrusted power for private gain."  Physicians are entrusted to make decisions on behalf of patients in the patients' best interests, not for the sake of payments from commercial firms.

Nonetheless, as in the cases of legal settlements of other charges involving other kinds of unethical behavior by big health care organizations, the consequences for these organizations seem to be slaps on the wrist with wet noodles.  Although the fines meted out may seem big to regular folk whose income has been stagnant for years, they are usually small compared to the organizations' revenues.  In any case, the fines are paid out of general corporate funds, and so ultimately by stockholders, employees, and perhaps customers, clients, or patients who had nothing to do with the kickbacks.  On the other hand, those who actually profited from the kickbacks usually walk away with no consequences.  Thus it seems unlikely that these sorts of fines in the absence of penalties assessed against individuals deter future bad behavior.  We have discussed these problems frequently in our posts on legal settlements.

The corporate integrity and/or deferred prosecution agreements deserve a bit more comment at this juncture.  They only seem to ask the company to refrain in the future from doing anything really nasty, but rarely incorporate serious scrutiny or any meaningful consequences should the company do something nasty.

In fact, the pioneering use of these  agreements by current New Jersey Governor Chris Christie when he was a US Attorney lead to charges that they were a form of "shakedown," rather than justice, and could be used to do favors for political cronies installed as the monitors for the agreement.  A 2014 article in the New York Observer provided examples of health care related settlements authored by Mr Chistie,

In 2007, the Star-Ledger broke the news that John Ashcroft, the former attorney general who had been Mr. Christie’s boss at the DOJ, received a '$52 million payday' for serving as an outside monitor to medical device company Zimmer Holdings. [See our summary of the Zimmer case including this deferred prosecution agreement here.]  Another DPA led to Bristol-Myers Squibb agreeing to spend $5 million to fund a business ethics program at Seton Hall University, where Mr. Christie had attended law school. [See our 2005 summary of the Bristol-Myers-Squibb case involving this deferred prosecution agreement here.]  And then there was the mother of all eyebrow-raising DPA paydays.

When the University of Medicine and Dentistry of New Jersey, one of the largest medical schools in the country, was revealed in 2005 to be a veritable parking garage for politically connected no-show jobs, Mr. Christie tapped an old friend, mentor and predecessor, former New Jersey U.S. Attorney Herb Stern, to serve as the school’s federal monitor. [We posted extensively on the UMDNJ case here.]  Mr. Stern is a giant in New Jersey legal circles—he is the subject of the book Tiger In the Court—but his fees after his return to private practice had raised eyebrows. The former CEO of Qwest, Joseph Nacchio, alleged that Mr. Stern wildly overbilled him for 'duplicative and unnecessary work,' including sending seven attorneys to attend a court appearance and even charging thousands for staff breakfasts, in-room movies and underwear. According to The New York Times, Mr. Stern’s firm 'ultimately billed the state for more than $10 million.' A couple of days after Mr. Stern landed the contract, Mr. Christie hired Samuel Stern, the son of Herb Stern, despite what were reported by The Star-Ledger to be 'objections from nearly every assistant U.S. attorney who interviewed him.' A couple days after that, Mr. Christie announced his own resignation as U.S. attorney.

Note further that most of these legal settlements seem uninformed by any previous bad behavior of the organization or the people involved.  Many of the organizations subject to these settlements have already made previous settlements, sometimes many of them.  Some of them have already signed corporate integrity or deferred prosecution agreements.  Relevant to the current case, Daiichi Sankyo's Ranbaxy subsidiary paid a $500 million settlement for selling adulterated products in 2013 (see our blog post here).

Finally, note that the settlements made by large health care corporations often seem effete compared to those imposed on smaller organizations or individuals.  Some recent examples appear in blog posts here and here.  In fact, the US Attorney responsible for the current Daiichi Sankyo settlement is Ms Carmen Ortiz.  In 2014, Ms Ortiz was responsible for the little ($6 million) Biomet settlement above, constructed without regard to several larger settlements made by the same company.  In fact, we had posted that Ms Ortiz was involved in settling three seemingly big previous cases, involving allegations that Forest Pharmaceuticals promoted Celexa in adolescents despite the drug's likely dangers to them, GlaxoSmithKline used misleading drug packaging, also likely endangering patients, and St Jude Medical gave kickbacks to doctors to induce them to implant medical devices.  All cases were settled with fines, but again no individuals suffered any negative consequences.  However, in contrast, Ms Ortiz was also the prosecutor who proved how tough she was when she threatened activist Aaron Swartz with serious prison time for alleged computer fraud, driving Mr Swartz to suicide.

So, quelle surprise, the Kabuki play that is regulation of and law enforcement for large health care organizations goes on.  As our society is being increasingly divided into a huge majority in increasingly difficult economic circumstances and a small and  increasingly rich minority, it also seems to be increasingly divided into little people who may be ruined by lawsuits, and imprisoned for even minor infractions, and big people who have impunity. 

True health care reform would hold leaders of health care organizations accountable for their organizations' behavior, and its effects on patients and health care professionals. 

For a more humorous take on Mr Christie's career, see this performance by Jimmy Fallon and Bruce Springsteen, "Governor Christie Traffic Jam" -




 

12:35 PM

Shire Settles Claims of Deceptive Marketing of Multiple Drugs for $56.8 Million, No Individual Held Responsible

Here we go again.  A big drug company has settled claims of deceptive marketing, yet no individual was held accountable.  The most extensive coverage came from the Philadelphia Inquirer, presumably since the announcement came from the local US Attorney.

The basics were:

Shire Pharmaceuticals L.L.C. will pay $56.5 million to settle allegations that it inappropriately promoted the sale of ADHD medicine, among other drugs, the U.S. Attorney's Office in Philadelphia said Wednesday.

Shire is registered in the Channel Islands and headquartered in Dublin, but operates from the United States....

As is usual in such cases,

Shire admitted no wrongdoing, but also entered into a five-year Corporate Integrity Agreement with the Office of Inspector General for the Department of Health and Human Services.

The detailed allegations make for interesting reading.

The settlement resolves allegations that, between January 2004 and December 2007, Shire promoted Adderall XR for certain uses despite a lack of clinical data to support such claims and overstated the efficacy of Adderall XR, particularly relative to other ADHD drugs. Among the unsupported claims allegedly made by Shire was that Adderall XR was clinically superior to other ADHD drugs because it would 'normalize' its recipients, rendering them indistinguishable from their non-ADHD peers. Shire allegedly stated that its competitors’ products could not achieve similar results, which the Justice Department contended was not shown in the clinical data Shire collected. Shire also marketed Adderall XR based on claims that Adderall XR would prevent poor academic performance, loss of employment, criminal behavior, traffic accidents, and sexually transmitted disease. In addition, Shire promoted Adderall XR for the treatment of conduct disorder, an indication not approved by the Food and Drug Administration (FDA).

The settlement further resolves allegations that, between February 2007 and September 2010, Shire sales representatives and other agents also allegedly made false and misleading statements about the efficacy and abuse liability of Vyvanse to state Medicaid formulary committees and to individual physicians. For example, one Shire medical science liaison allegedly told a state formulary board that Vyvanse 'provides less abuse liability' than 'every other long-acting release mechanism' on the market. No study Shire conducted concluded that Vyvanse was not abusable, and, as an amphetamine product, the Vyvanse label included an FDA-mandated black box warning for its potential for misuse and abuse. Shire also made unsupported claims that treatment with Vyvanse would prevent car accidents, divorce, being arrested, and unemployment.

Additionally, the settlement resolves allegations that, from April 2006 to September 2010, Shire representatives improperly marketed Daytrana, administered through a patch, as less abusable than traditional, pill-based medications. The settlement also resolves allegations that, for part of the foregoing periods, Shire representatives improperly made phone calls and drafted letters to state Medicaid authorities to assist physicians with the prior authorization process for prescriptions to induce these physicians to prescribe Daytrana and Vyvanse.

Finally, the settlement resolves allegations that, between January 2006 and June 2010, Shire sales representatives promoted Lialda and Pentasa for off-label uses not approved by the FDA and not covered by federal healthcare programs. Specifically, the government alleged that Shire promoted Lialda off-label for the prevention of colorectal cancer.

Thus, the allegations were that Shire marketers and "agents" made false, sometimes apparently ridiculous claims about four different medicines.  Some of these claims, for example, that an amphetamine drug had no abuse potential, or that an anti-inflammatory drug would prevent cancer (in patients at risk for cancer), could conceivably have led to patients being harmed. 


According to the Wall Street Journal, the settlement was made to clean up loose ends before the big take-over of Shire,

 The pact resolves one outstanding issue ahead of Shire's planned $54 billion acquisition by AbbVie Inc.

So note that the dollar amount of the settlement is approximately one one-thousandth (0.1%) of the total value of Shire.

According to the Philadelphia Inquirer, no one admitted guilt, and no individual will pay any penalty:

'We are pleased to have reached a resolution and to put this matter behind us,' Flemming Ornskov, Shire’s chief executive officer said in a statement.

So this follows the usual formula for legal settlements in health care.  A big pharmaceutical company was alleged to have deceptively marketed multiple products.  Some of the deceptions could have lead to patient harm.  The government took the company to court, but the end result was a monetary penalty paid by the company that might appear large, but which was tiny compared to the assets of the company.  The company did not have to admit guilt.  No individual at the company paid any penalty or suffered any consequence.  While the organization had to sign a "corporate integrity agreement," it is not clear that such agreements prevent future bad behavior.

There have been many, many such settlements, as we have discussed on Health Care Renewal.  At least these settlements serve as evidence that many, many large health care organizations have behaved unethically, often in ways that not only increase health costs, but may directly harm patients.  Yet the settlements seem bent over backwards not to trouble the people who personally profited from unethical behavior. 

Individual company marketers, their supervisors, and top executive likely made more money because of the revenue brought in by the unethical practices.  However, the settlement somehow avoided identifying any of them, or even stating unequivocally that the company, or any of its employees did anything wrong.  That is absurd, since if nothing bad was done by anybody, why did the company have to pay anything?  Beyond that, if individuals who work for big drug companies, and other large health care organizations know that whatever they do in their official capacities, they will not be held personally responsible, what would deter them from taking unethical actions in the future?

Most citizens trust drug companies to provide safe effective medicines.  Marketing drugs as safer than they are, or for purposes for which they are not effective abuses the companies' entrusted power.  Doing so in order to enrich oneself thus is a manifestation of corruption.  The ongoing parade of legal settlements is thus a marker of how corrupt health care has become. 

Furthermore, the continued inability of regulators and law enforcement to do more in the face of corruption suggest moral failure, incompetence, and perhaps more corruption.

We will never achieve true health care reform, and will never really improve our vastly over-priced, ineffective health care system until we address this sort of health care corruption. 

A final note: Eric Holder, the current US Attorney General, will soon leave.  While he has been hailed for promoting human rights in some instance (that is, for LGBT individuals), he has been criticized for never making an effort to pursue the top corporate executives who were responsible for the global financial collapse of 2008 (look here) although the Department of Justice constantly goes after relatively small scale white collar criminals.  He also appears to have almost never pursued any top corporate executives involved in deceptive, unethical, illegal or corrupt health care practices, while the government constantly pursues perpetrators of relatively small scale Medicare and Medicaid fraud (look here).  One of his US Attorneys notably pursued the late Aaron Swartz for vaguely specified computer crimes which did not appear to harm anyone while she gave passes to executives at big health care corporations that settled cases of alleged actions that likely harmed patients (look here).   His failure to pursue such large scale health care corruption should be regarded as no less serious than his failure to pursue financial corruption.

11:03 AM

Just the Latest Legal Settlement for HCA

Last month, we posted about investigative reports that suggesting that for-profit hospital chain HCAwas pushed by its private equity owners to put short-term revenue ahead of good patient care.  A legal settlement announced this week corroborates these concerns. 

As reported by television station WRCB in Chattanooga, TN,

HCA Inc., one of the nation's largest private hospital chains, has agreed to pay $16.5 million to settle alleged violations of the Ethics in Patient Referrals Act (also known as the Stark law), the False Claims Act, and other federal and state laws and regulations in connection with the operation of its subsidiary, Parkridge Medical Center, Inc., in Chattanooga.
In addition, Parkridge Medical Center has entered into a comprehensive five-year Corporate Integrity Agreement with the Office of Inspector General of the U.S. Department of Health and Human Services (HHS-OIG) to ensure its continued compliance with federal health care benefit program requirements.
As alleged in the settlement agreement, during 2007, HCA, through its subsidiaries Parkridge and HCA Physician Services (HCAPS), entered into a series of financial transactions with a physician group, Diagnostic Associates of Chattanooga, through which it provided financial benefits intended to induce the physician members of Diagnostic to refer patients to HCA facilities.
The financial benefits included lease of office space from Diagnostic at a rental rate well in excess of fair market value to meet the mortgage obligations of the Diagnostic members and release of Diagnostic members from a separate lease obligation. These financial arrangements violated the Ethics in Patient Referrals Act and the Anti-Kickback Statute – laws designed to protect patients as well as the integrity of government-funded health care benefit programs such as Medicare, Medicaid, TRICARE, and TennCare.

The issue here were allegations that HCA and its subsidiaries were paying physicians extra so that they would refer patients to an HCA hospital. Obviously, physicians are supposed to put each patient's interests ahead of extraneous considerations, and hence should make referral decisions based on the patients needs, and the likely benefits and harms of the referral, not the amounts the physicians might make from such payments.

Referrals for particular services can be very lucrative for hospitals.  So this settlement seems to provide more evidence that to get profitable referrals, HCA was willing to subvert physicians' values by paying physicians to induce to make what might have been the wrong decisions for individual patients.  Of course, in this situation some physicians were hardly blameless, since they were also willing to set aside their values to receive the payments that generated those referrals.

This fits with the thesis we advanced last month.  While hospitals are supposed to have a mission to put care of the sick ahead of all else, it appears that for-profit hospitals, and especially those owned by private equity are more likely to put short-term revenue ahead of patient care.

As an aside, while this settlement provides useful information, do not think of it as a solution to the immediate problem. 

As we have frequently asserted, it is doubtful that the relatively small payment and the relatively unlikely to be enforced corporate integrity agreement imposed in this settlement will change the company's behavior, in the absence of any negative consequences for the people who authorized, directed or implemented the bad behavior.  HCA once made a $1.7 billion fraud settlement, at the time the biggest such settlement ever made (see this post).  However, the company's CEO at the time, Rick Scott, left the firm with a golden parachute and no negative consequences, and is now Governor of Florida.  If that previous huge settlement did not deter the more recent bad behavior in the absence of any penalties for company executives, why should we expect that the current comparatively tiny settlement also in the absence of such penalties will have any effect?

As we have now said many, many times, we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Furthermore, as I wrote last month, we need to challenge the notion that direct health care should ever be provided, or that medicine ought to be practiced by for-profit corporations. Before market fundamentalism became so prominent, many stated prohibited the corporate practice of medicine, and the American Medical Association forbade the commercialization of medicine. It is time to heed that wisdom. I submit that we will not be able to have good quality, accessible health care at an affordable price until we restore physicians as independent, ethical health care professionals, and until we restore small, independent, community responsible, non-profit hospitals as the locus for inpatient care.

1:33 PM